Lam Research Corp (LRCX)

Short-term

Turnover ratios

The activity ratios for Lam Research Corp over the specified periods reflect varying operational efficiencies across inventory management, receivables collection, payables management, and overall working capital utilization.

Inventory Turnover:
The ratio demonstrates a declining trend over the examined period, decreasing from 2.91 times on June 30, 2021, to 2.00 times on June 30, 2023. This suggests a gradual elongation in the number of times inventory is sold and replaced within the year, indicating potential inventory accumulation or slower sales velocities. A slight improvement is observed subsequently, rising to 2.20 times by June 30, 2025, which may imply better inventory management or increased sales activity.

Receivables Turnover:
This ratio shows a general upward trend, ascending from 4.83 times in June 2021 to a peak of 6.17 times in June 2023. This indicates that the company has been increasingly efficient in collecting receivables, leading to shorter receivables periods and stronger cash flow management. Although it declines slightly to 5.92 times in June 2024, it stabilizes around 5.46 times in June 2025, maintaining relatively strong receivables management.

Payables Turnover:
The ratios fluctuate modestly, but an overall increase is evident from 9.43 times in June 2021 to 9.54 times in June 2023, signifying a slight increase in the frequency of paying suppliers. The notable jump to 12.79 times in June 2024 indicates an acceleration in payables payments, potentially reflecting improved liquidity or strategic payment policies. The data for June 2025 is unavailable, preventing further analysis.

Working Capital Turnover:
The ratio exhibits variability but generally indicates an efficient utilization of working capital. It increases from 1.80 in June 2021 to 2.23 in June 2022, then experiences a slight decline to 1.93 in June 2023. The ratio drops further to 1.74 in June 2024 but recovers to 2.32 in June 2025, suggesting a renewed or improved efficiency in employing working capital to generate sales.

Overall, the analysis indicates that Lam Research Corp has experienced improvements in receivables collection efficiency and working capital utilization over time. Conversely, inventory turnover has declined initially but shows signs of recovery, while payables management has become more aggressive in recent years. These trends collectively reflect evolving operational strategies aimed at optimizing cash flow and working capital management amid changing market or internal conditions.

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Average number of days

The activity ratios of Lam Research Corp, encompassing Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables, reveal significant trends over the period from June 30, 2021, to June 30, 2025.

Starting with the Days of Inventory on Hand, there has been a consistent increase. In 2021, inventory holding periods were approximately 125.51 days, which rose to 154.75 days in 2022, and further extended to 182.14 days in 2023. This upward trend continued into 2024, reaching approximately 196.05 days. However, a decline is observed in 2025, with inventory days decreasing to roughly 166.28 days. The overall pattern indicates a substantial increase in inventory holding duration over the initial years, suggesting the company has been holding more inventory relative to sales, which could reflect changes in production cycles, supply chain management strategies, or product mix adjustments.

Regarding the Days of Sales Outstanding, there has been notable variability. In 2021, DSO was approximately 75.53 days, increasing to 91.40 days in 2022, indicating longer collection periods. Conversely, in 2023, DSO decreased significantly to 59.13 days, reflecting improved receivables management or faster collection efforts. Slight increases are observed thereafter, reaching 61.69 days in 2024 and 66.88 days in 2025, pointing to a modest lengthening of receivables collection period but remaining below the 2022 peak. This variability suggests periodic adjustments in credit policies or customer payment behaviors but generally indicates relatively efficient receivables management considering the industry standards.

For the Number of Days of Payables, the data shows a relatively stable pattern from 2021 to 2023, with payables days approximately 38.72, 39.45, and 38.24 days respectively. In 2024, the payable period decreases notably to about 28.54 days, implying a faster turnover of payables or accelerated payment schedules. The data for 2025 is not available, precluding further analysis for that year.

In summary, over the analyzed period, Lam Research Corp experienced a marked increase in inventory holding periods, a fluctuating yet generally favorable improvement in receivables collection times, and a reduction in payable days towards 2024. These activity ratio trends suggest shifts in operational efficiencies, supply chain management, and credit policies, which collectively impact the company's working capital cycle.

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See also:

Lam Research Corp Short-term (Operating) Activity Ratios

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Long-term

Analyzing Lam Research Corp’s long-term activity ratios reveals notable trends over the periods from June 30, 2021, through June 30, 2023. The Fixed Asset Turnover ratio demonstrates a declining pattern, decreasing from 11.22 in 2021 to 10.46 in 2022, and further down to 8.30 in 2023. This downward trajectory indicates a reduction in the efficiency with which the company is utilizing its fixed assets to generate sales. Several factors could contribute to this trend, such as increased capital expenditures not immediately translating into proportional sales, or operational adjustments leading to underutilization of fixed assets.

In parallel, the Total Asset Turnover ratio shows a modest fluctuation; it increased from 0.92 in 2021 to 1.00 in 2022, suggesting a brief improvement in overall asset utilization efficiency. However, this ratio dipped slightly to 0.93 in 2023, reflecting a slight decline in the overall efficiency of asset use relative to sales generation. The ratios for 2024 and 2025 are not provided, but the available data up to 2023 indicates a trend of modest oscillation rather than consistent growth.

In summary, Lam Research’s long-term activity ratios suggest a decline in asset utilization efficiency over the analyzed period, particularly in the use of fixed assets. This could imply that the company has become less effective in generating sales from its asset base or that capital investments are higher relative to sales output. Monitoring these ratios in future periods would be essential to assess if this trend persists, indicating potential operational or strategic shifts that could impact overall efficiency.

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See also:

Lam Research Corp Long-term (Investment) Activity Ratios